Gold Crashes Below $4,200 as Oil Strength Boosts Hawkish Fed Expectations
Gold prices plummeted on Monday, falling below $4,200 an ounce as rising oil prices and higher US bond yields led investors to believe that the Federal Reserve may continue its hawkish monetary policy. Spot gold dropped 2.1% to $4,198.10 an ounce, while US gold futures fell 2.1% to $4,231.
The decline put bullion on track for its steepest daily drop since September 1 and extended the pressure that pushed it lower last week. Gold typically benefits from oil-driven inflation scares, but this time investors are treating higher energy costs as a reason for the Fed to remain hawkish. Brent crude climbed back above $106 a barrel after US President Donald Trump rejected an Iranian proposal to reopen the Strait of Hormuz and end the conflict.
Barbara Lambrecht, commodity analyst at Commerzbank, said that earlier-than-expected Fed tightening was lifting both nominal and real yields, increasing the cost of holding gold. The pressure is particularly visible in the bond market, with US 10-year yields around 5.2% late last week, close to a two-decade high.
The $4,200 area has become an important near-term test for gold prices. OCBC strategists noted that persistent weakness below the $4,300-$4,354 resistance zone could expose support around $4,200 and then $4,000.